Investors Bet on Price of Facebook IPO

For years, it has been Waiting for Godot for investors who want to know when they can get a piece of hot tech company Facebook.

Jessica Vascellaro / The Wall Street Journal

Mark Zuckerberg bought a gong for the Facebook office, and employees bang it when they launch new products.

Facebook CEO and founder Mark Zuckerberg speaks to press and advertising partners at an event in New York.

In a Page One story in Thursday’s Wall Street Journal, Facebook chief executive Mark Zuckerberg suggests they are going to have to continue to wait.

“We’re going to go public eventually, because that’s the contract that we have with our investors and our employees,” Mr. Zuckerberg said in the profile of the young chief. But, he added, “We are definitely in no rush.” (You can read the rest of the story here.)

What investors really want to know, however, is how much a slice of the social phenomenon is going to cost them. And they are starting to come up with some bets.

Investors currently buying or looking to buy Facebook shares anticipate the company will go public in 2011 with a market capitalization of between $35 billion to $40 billion, according to people familiar with their thinking.

Facebook-watchers are arriving at those numbers by estimating the company’s current and future revenue and profits and applying a multiple similar to the multiple investors place on other hot tech companies, like Google.

Lou Kerner, a former Internet analyst at Merrill Lynch and Goldman Sachs, is even more bullish, suggesting that Facebook could be worth $59 billion in 2011 and more than $100 billion by 2015.

It is more than a parlor game. Real money is already trading hands, as shares of the company are being bought and sold on private market exchanges like SecondMarket and SharesPost.

Those prices, which in some cases have climbed over $30 a share, could start to dictate the company’s IPO timetable; companies often want to go public before expectations get too high.

Of course, the price at which the company goes public is largely symbolic, a sign of investors’ expectations rather than real fundamentals.

But in Silicon Valley, bragging rights matter. So, you can bet some Facebook employees are fixated on one number to beat: $27 billion.

That was Google’s closing market cap on its first day of public trading in 2004.